We want to begin this morning’s piece by taking a moment to honor those who have given the “last full measure of devotion” to defend our country…now that we’re heading into Memorial Day weekend. However, before we do that, we want to send our thoughts and prayers to those who have been impacted by the tragedy in Texas this week. The term “thoughts and prayers” do not seem strong enough. Those words seem a bit empty…because we need to use them so often in today’s society. However, we cannot more forward without saying something…and our thoughts and prayers ARE definitely with our fellow Americans who are going through hell this week. God bless you.
The tragedy in Texas this week reminds us that they are still many, many problems in this country. However, there is a reason why so many people want to come here and live. The United States of America is the one of the longest running republics in world history….and thousands of men and women have died...so that our republic could live. When I was a kid…and WWII was still a recent memory…EVERYBODY flew an American flag outside their home on Memorial Day. We have gotten away from that tradition, but we hope you will consider flying a flag this weekend to honor those who have fallen in defense of our country. Like we said, we have A LOT of problems…and we are quite divided right now. However, we are still a country where “hope” still reins eternal. That’s not true everywhere in this world.
Anyway, when we left the office yesterday…after seeing the disappointing earnings out of NVDA…we thought the futures would be pointing to a lower opening when we got in this morning. Instead, they’re pointing to a higher opening. If (repeat, if) these gains can hold, it would be the first time in a long time that the stock market reacted positively to bad news.…..We remain VERY cautious on the stock market for the intermediate/long-term, BUT a bounce today could/should be quite positive on a short-term basis. However, as we mentioned earlier this week, the S&P 500 and the NDX 100 had both (finally) become oversold on several different charts. Therefore, they were becoming ripe for a near-term bounce…even if the longer-term outlook is not good at all.
We’d like to highlight another bullish development on the technical side of things this morning. The MACD charts on both the SPX and NDX saw positive crosses yesterday. They were only very mild crosses so far, but if they can become more pronounced today, it should be another positive development…at least on a very short-term basis. Remember, the days surrounding the long Memorial Day weekend, so it’s not out of the question that investors will get some badly needed relief as we head into the long weekend.
Again, longer-term, there is no change to our very cautious outlook. The deleveraging process that began at the beginning of the year has still not taken the stock market back down to a fairly valued level. NOW…it’s becoming more and more evident that our long-held opinion that earnings estimates will have to come down in a significant way going forward will come to fruition. Therefore, the stock market still has further to fall before we hit the ultimate bottom for this decline in our opinion. However, no market moves in a straight line, so those who are short right now will need to be very nimble over the near-term.
Matthew J. Maley
Chief Market Strategist
Miller Tabak + Co., LLC
Founder, The Maley Report
275 Grove St. Suite 2-400
Newton, MA 02466
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